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Economists on Wall Street are revising up their estimated of US economic growth over the coming years due to Washington's embrace of tax cuts and government spending increases. Another impact of Washington's fiscal stance will be larger budget deficits in future years, which could constrain the government's ability to respond ti future downturns or crises. The final version of a $1.5 trillion tax cut signed into law by President Donald Trump last week provides a slightly more front loaded round of fiscal stimulus than earlier versions passed by Congress. Meanwhile, Congrss is likely to consider a deal to boost federal spending caps and spend heavily on disaster relief. The combined tax cuts and spending increases are likely to add around .7 percentage point to gross domestic product growth in 2018 and an additional .2 percentage point in 2019. One reason for relatively optimistic 2018 growth outlook stems from generous and historically unprecedented late cycle stimulus . The change in the federal spending outlook as opposed to the tax cut is a factor not yet fully appreciated by markets.
FORECAST FOR GROWTH
DECEMBER NEWSLETTER 5